A Steel - Solid victory

It created the the Largest Steel company in the World. It is one of the most intensely fought Merger Acquisitions stories in the Steel Industry. And it will always be an inspiration to all Indian entrepreneurs with a Global twinkle in their eyes. The acquisition of Arcelor by Laxmi Niwas Mittal is no less than a thrilling story of a Conqueror's monumental victory. But after reading the story in detail as narrated by Paul Carson in his book " Cold Steel", one realizes that this victory was a combination of many individual wins:

1. A win of Business logic over Prejudices:

2. A Win of Intentions over Tactic

3. A Win of Maturity over Jingoism

A description follows:
A win of Business logic over Prejudices: When Mr Mittal made this bid, more than anything else, he was clear about one thing - "The deal is fully in the interest of the Steel Industry". Worldwide, The steel industry was in a dire need for consolidation, and Mittal knew this deal was a monumental step in that direction. This belief of Mr Mittal, firmly based on Business logic and a thorough understanding of the steel industry proved to be the strongest point of the Mittal campaign which followed. It was due to this belief which won negotiations after negotiations with the regulatory bodies for Mittal. It was due to this belief that, in an unprecendented manner, rallied Arcelor's investors towards Mittal side. It was due to this belief that the Media always spoke favourably of Mittal's campaign. All of them shared the belief, because all of them knew that the belief was an outcome of Sound business logic.

The Arcelor counter - campaign, on the other hand, just denied to even think for a second and assess whether the deal has any merit or not. Theirs was a knee jerk reaction right from the very beginning, especially from their CEo Guy Dolle. For him, it was always " A company of Indians" being preposterous enough even think of acquiring a European giant like Arcelor. This prejudice towards Mittal, which many at Arcelor shared, clouded Arcelor's reactions all thru. In the end, this proved to be the biggest factor why Arcelor lost support from all spheres, including their own shareholders.

A Win of Intentions over Tactic: Tactics, Manoeuvres, Brinksmanship - these have been parts of all high power deals till now. In this deal aslo, both parties made use of them; however it was the intention by which they were being used which decided their success and failure. While Mittal's moves had a positive intention of creating value and stregthening the Steel Industry, Arcelor's tactics were driven by a negative intention of "Blocking Mittal in whichever way possible". It was this difference in intention which resulted in a climax where more than 50% of Arcelor's shareholders forced the Arcelor board to consider Mittal over the "White Knight" which Arcelor had found in Alexey Mordashov of SeverStal, Russia. One of the last ditch tactis of the Arcelor board was this - It was proposed to allow Mordashov a 32% share in the company plus an option of Share buy back which would have givne him another 6 %. They knew that shareholders will not approves this, so rather than asking for approval on whether they should go ahead with Mordashov, they instead decided to go ahead with Mordashov and then ask the shareholders to express if they disapproved. To execute this calling of a "Negative vote", they called an Meeting of all shareholders and planned to ask them if they were in diagreement of the Mordashov deal. The shareholders were informed that Arcelor will go ahead with Mordashov until at least 50% shareholders be present at the meeting and vote in disagreement. Arcelor thought of this as a Winning move since historically, the average attendance itself at the these General meeting used to be never more than 35%. However, it was nothing but a win of intention over tactics which resulted in a turnour of an astounding 60% at the meeting with 57% voting against Mordashov; well actually voting FOR Mittal.

A Win of Maturity over Jingoism: The deal had a very strong nationalistic lement into it from the European angle. And it was understandable. Steel was a subject of national pride for the 6 European countries which constituted Arcelor - and especially for Luxembourg where Areclor was headquartered. It was said that - "steel flowed with blood for every citizen of Luxembourg". And that was because at one point in time not very far off in history, 70% of Luxembourg's organized labour worked for the Steel industry. In such context, a doze of nationalism was inevitable to get mixed in this "Business" Deal. Well, as a matter of fact, mixing always happens. Personal drives always get mixed with professional ones, emotions always get mixed with logical decision making, subjective biases always get mixed with Objective assessment. And more than these, nationalism gets mixed with business. However, isn't maturity all about knowing what gets mixed with what, and to what extent should this mixing happen? I believe maturity doesn't lie in denying this mixing, it lies in being aware of it and being in its control.

All stakeholders in this deal, other than Arcelor and to some extent the French Government, showed this maturity. Even the other 5 governments who were to legally approve or disapporove this deal. As an interesting aspect of the story, the Luxembourg government was already in the course of amending its takeover laws when this deal was announced by Mittal. Inordinate pressure was put on the Luxembourg government to do this amendment in such a way so as to thwart Mittal's bid. Completely short sighted in nature, these pressures were a perfect example of how NOT to mix nationalism in business; because when this kind of hapens, nationalsim turns into Jingoism. Had the Luxembourg government given in, it would have ended up painting a protectionist, anti - business image for the country which was striving to become one of the world's "most preferred investment destinations". Succumbing to these pressures would have been completely suicidal. Hats off to the Luxembourg government, it didn't give in to any of these protectionist overtures. The best part - It didn't unduly favour Mittal also in making the amendment. It just framed a policy based on rational thinking and business acumen - and given that these two were the cornerstones of the Mittal deal in the first place, there was no way in which the policy proved to be any impediment to Mittal. A mature decision making ultimately prevailed over Jingoism.